First U.S. Investment Likely to Be Gas Project, Followed by 8 Nuclear Reactors... Key Issue Is Economic and Business Feasibility

Encinal Gas Power Plant in Texas to Reach 6.2 GW Capacity
Compromise at USD 22 Billion Between Korea and the U.S.
MOU Expected on the 18th After National Assembly Briefing

With the construction of the Encinal gas combined-cycle power plant in Texas, a project worth USD 22 billion (KRW 30 trillion), being strongly considered as the first major investment in the U.S., domestic procedures have entered their final stage. As a follow-up, discussions are also underway on a plan to build up to eight large-scale nuclear power plants in the United States. However, just because the first project is taking shape does not mean that the actual investment will be executed immediately. Detailed investment terms between South Korea and the United States must still be coordinated, and domestic procedures such as reporting to the National Assembly remain.

◆KRW 30 Trillion 'First U.S. Investment'... Will it solve the Texas Power Crisis? According to the government and political circles on September 8, the Ministry of Trade, Industry and Energy reported the U.S. investment project plan in a closed ruling party-government consultation held in the National Assembly the previous day. The Encinal project, which is most likely to become the first U.S. investment, is a plan to build a gas combined-cycle power plant in the Encinal region of Texas, intended to address the rapidly growing power demand in Texas.

Recently, Texas has seen a surge in electricity demand as large advanced semiconductor factories and artificial intelligence (AI) data centers are established in the region. The total installed capacity of the Encinal project is approximately 6.3 GW (gigawatts). Initially, it is expected that a 1.4 GW gas turbine generation facility will be built first to check actual demand and economic feasibility, after which an additional 4.9 GW high-efficiency combined-cycle facility would be constructed in phases.

It is reported that the scale of the project was finalized through last-minute negotiations. Initially, the South Korean government reviewed an amount near USD 20 billion, but the U.S. side requested a 25% increase to USD 25 billion. Ultimately, the two sides reached a compromise at approximately USD 22 billion.

◆Follow-up card: '8 Nuclear Reactors'... Will the project grow to USD 120 billion? The key follow-up U.S. investment project under serious consideration is a proposal from the United States to build up to eight large-scale nuclear power units. A plan is being discussed to construct both the South Korean APR1400 model and the AP1000 developed by U.S.-based Westinghouse. With each unit estimated at around USD 15 billion, the total cost for eight reactors would reach USD 120 billion. However, instead of confirming a specific amount, the South Korean government is negotiating to include a broad phrase such as "cooperation for the construction of eight nuclear reactors."

The two countries are allocating USD 150 billion for shipbuilding cooperation out of the total USD 350 billion U.S. investment, and are promoting additional strategic investments of USD 200 billion. Candidate projects for strategic investment are reviewed for commercial viability and strategic or legal feasibility by the Korea-U.S. Strategic Investment Project Management Committee, and the Operating Committee then examines financial conditions and investment prospects and makes decisions. Next, final investment projects and their amount/timing are fixed after reports to the National Assembly and bilateral consultations, and the Korea-U.S. Investment Corporation (KUIC) executes the investments. The government has set an annual investment limit of USD 20 billion, with the intention to flexibly adjust the amount and timing according to market conditions.

Panoramic view of Unit 4 at the Barakah Nuclear Power Plant in the UAE.

◆The Key is Commercial Viability… MOU Set for the 18th After National Assembly Briefing Profitability is crucial. If the project is determined to be economically and commercially viable, reports will be submitted to the competent standing committees of the National Assembly, specifically the Strategy and Finance Committee and the Trade, Industry, Energy, SMEs, and Startups Committee. If business feasibility is deemed low, consent from the committee must be sought. Given that the government has consistently emphasized "national interest and commercial viability," the reporting process rather than seeking formal approval is likely to proceed.

As soon as detailed negotiations are concluded, South Korea and the United States are expected to proceed with final signing of the Memorandum of Understanding (MOU) as early as the 18th. After obtaining approval, including that of U.S. President Donald Trump, the project will be finalized. For each U.S. project, a Special Purpose Vehicle (SPV) will be created and operated.

Currently, even three months after its launch, KUIC—which is responsible for executing U.S. investments—has yet to fully establish its core investment organization. The first president and managing director for business planning have been appointed, but the head of strategic investment (director of investment), who oversees actual investment work, has already resigned and the post remains vacant. KUIC is currently recruiting candidates for investment director and auditor, and is expanding its workforce by hiring 37 additional staff members.

A government official commented, "The specifics of the U.S. investment projects and methods of investment will ultimately be determined through negotiations between South Korea and the United States. Depending on the outcome, domestic procedures and detailed plans for each project will also be finalized."

This content was produced with the assistance of AI translation services.